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Is your customer churn rate stopping you from growing your agency?
In an industry where most agencies have a relatively small number of customers, loyalty is incredibly important.
Unfortunately, there are all sorts of ways that customer experience and satisfaction can suffer. Potential causes of customer churn include poor customer service, inattention to customer needs, and a weak onboarding process.
Yet because the product you’re selling is as much ideas and concepts as it is tangible outputs, it can be really tough to figure out exactly why customer attrition happens.
In this post, you’ll learn why churn prevention matters, plus nine proven customer retention strategies that help you keep clients longer!
Why is reducing churn important?
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Reducing churn matters for all kinds of revenue and profitability reasons that all boil down to this:
Which is easier to fill, a five-gallon bucket or a five-gallon bucket with 10 holes drilled in the bottom?
Your agency is more complicated than a five-gallon bucket. But the principle is the same: keeping a healthy client load is easier when those clients aren’t leaking out the bottom for entirely avoidable reasons.
Consider the following ways reducing churn can help your agency.
Revenue stability and growth
Stable revenue that produces adequate profit is a requirement if you want to see continued success and growth. There are plenty of smart tactics for increasing your agency’s profitability, but none are as straightforward as simply keeping the good-fit customers you already have.
High churn rates can significantly impact an agency’s revenue, whereas a stable customer base can provide consistent revenue and even opportunities for upselling or cross-selling.
Customer lifetime value (CLV)
Another angle to consider is customer lifetime value (CLV): the amount of value a customer represents over the entire working relationship.
The longer clients stay with your agency, the more valuable they become in terms of the revenue they generate. Reducing churn ensures that you maximize the value derived from each account. You also tend to build deeper relationships with these long-term clients, further increasing your chances of cross-selling and upselling.
In the agency world, where a single client generates significant ongoing revenue, keeping churn to a minimum should be a top priority.
Reducing overall costs
Reducing churn also lowers overall costs, especially related to sales and marketing.
It's widely acknowledged that acquiring a new customer can cost several times more than retaining an existing one. Exactly how much more is a question of some debate, but for marketing agencies, it usually costs about four times more to acquire a new client than to retain a current one.
Because retaining existing customers is generally more cost-effective, high retention rates can help reduce the overall cost of customer acquisition.
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Types of churn in agencies
We tend to think of churn as a simple metric of how many clients leave, but churn can show up in other ways, too. These four types of churn are frequent culprits when agencies have revenue issues.
Client churn
Client churn is what we usually think of first when people bring up churn. It’s the most direct form of churn for agencies, where a client ends their contract or decides not to renew it.
Some level of churn is natural — inevitable, even. Clients outgrow agencies, and agencies outgrow clients. Clients get acquired or go out of business or take their marketing in-house.
So the goal isn’t zero churn, but you still want to optimize it to be as low as possible. An elevated level of client churn at an agency is always a concern, and it’s one telltale sign of poor resource management at an agency.
Revenue churn
Revenue churn happens when clients pay less than they used to. Even when client churn is under control, revenue churn can eat at your profit margins as clients bow out of specific services and renegotiate contracts.
Project churn
Project churn is even more specific, down to the project level within a client account. It happens when a client stays with an agency but cancels a specific project or campaign.
Project churn can be more disruptive to operations and project management than other forms of churn, resulting in revenue loss and resource reallocation.
Margin churn
Margin churn happens when costs increase, but revenue doesn’t increase to match. As a result, profit margins decrease. This can happen if an agency allocates more resources to a project than initially anticipated (but doesn’t have the pricing structure to recover that margin).
9 ways to reduce churn at an agency
If it’s time to turn the churn around at your agency, you need more than definitions. You need actionable strategies!
Good news: We’ve got nine of those for you right here.
Use these nine approaches to reduce your churn rate and improve your revenue and profitability.
1. Use a client-centric project management platform
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Projects can get complicated in a hurry, especially because of the client “X factor”: It’s nearly guaranteed that you’ll eventually need the client to be involved in a project, but it’s far from guaranteed what kind of response you’ll get.
One reason for this client-agency disconnect is that most project management platforms weren’t designed in a client-centric way. If they have a client or guest view at all, it’s very limited or feels like a tack-on gimmick.
But some project management platforms take a different, client-centric approach. Teamwork.com was built for client work, so it’s designed inside and out to support your agency and your clients.
With an intuitive and flexible Client Users functionality, Teamwork.com empowers agencies to invite their customers into the project in a client-centric, client-friendly manner. With Teamwork.com, you’ll increase transparency and more easily keep your clients engaged and involved. It’s a great way to reduce churn by improving those client-agency relationships.
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2. Proactively communicate with clients
Next, make sure you’re staying on the leading edge of communicating with clients. Don’t let your clients come to you with questions about the status of a project or the progress you’ve made on a campaign; go to them with that information first.
When clients feel that personal touch, that you care about their business, and that they aren’t just a number, they tend to stick around.
The opposite is also true: When clients start to feel like your agency isn’t giving their business enough attention, they may start looking elsewhere.
3. Offer incentives and discounts
Next, offer incentives and discounts to your loyal and long-term clients. These are a way of staying sticky: you want to make it easy to stay with your agency and painful to break up. With the right incentives, a client on the fence about leaving you for another agency may decide to stick around. This not only reduces churn but gives your customer loyalty initiatives a nice boost!
4. Maintain a feedback loop
Proactive communication (#2 on this list) is vital, but one-way communication only gets you so far. You need to hear from your clients regularly so you can continue pivoting and adjusting to meet their needs.
Some clients are naturally more communicative, while others might naturally keep things closer to the vest — and this can become a problem if the relationship starts to weaken.
To overcome this obstacle, set up a customer feedback loop: a regularly scheduled point of feedback where you can gather those insights your client might be sitting on.
Getting your client to air frustrations early (before those frustrations metastasize into contract-killing monstrosities) gives you a better chance to solve those problems and avoid the associated churn.
5. Forge a strong competitive edge
Your best customers don’t leave if you’re the best.
In a competitive industry, every agency needs to find a competitive edge if it wants to experience sustained success.
If you’re a generalist agency with decent results but nothing distinctive to offer, you risk entering a commodity market where clients are chasing the cheapest contracts.
Blair Enns of “Win Without Pitching” tells the story of a national brand contacting over 100 agencies, interviewing more than 80, and inviting 12 to provide a (free) pitch:
“If your prospect sees 12 (let alone 80!) alternatives to your agency, then you have zero ability to premium price, little input into the financial terms of the relationship, and an equally dismal opportunity to control or affect the selling process. You might as well be selling cattle by the pound at auction.”
Instead of competing for commodity clients in a race to the bottom, develop a strong competitive edge: some factor that makes you the clearly better choice for certain clients.
Then, you can charge more, deliver better results, and keep right-fit clients for longer.
6. Analyze churn when it happens
Like we said at the outset, churn is inevitable. Unless you’re a black-hole agency, you will eventually lose a client.
Some churn is unavoidable, but a lot of it is avoidable. And you’ll never know which is which unless you look.
So, every time you lose a client, look at the circumstances and the data, doing your best to determine why. Where those elements are fixable, fix them!
7. Understand who is at risk
There’s the churn you expect, but then there’s the churn you never saw coming. And one hurts worse than the other. A lot worse.
Understanding which clients are at the greatest risk of churn is an imperfect science, but there are usually signs. Have they been tightening up their spend? Getting colder in their communications? Lowering the amount of business they send your way?
These could all be signs of impending churn, signaling that it’s time to double down on the other eight ideas in this post.
Some organizations turn to SaaS business tools like ChurnZero to help them manage churn. Teamwork.com integrates well with ChurnZero: The company has built powerful integrations with both Teamwork Desk and Teamwork Projects, bringing in your project and helpdesk data into the ChurnZero client dashboard, you’ll gain even clearer insights into when clients are headed towards churn.
8. Personalize client relationships
Clients like to be treated like humans, not dollar signs. One relatively easy way to create this feel is by personalizing client relationships.
Recognizing working anniversaries (“Happy one year working with our agency!”) and highlighting milestones (“Congrats on 20 years in business!”) are two quick ideas.
9. Be adaptable to client needs
Your clients’ needs will change over time, and it’s important to flex where you can flex. Requiring every client to fit your mold will eventually drive some of them away. Maybe your mold fit great when they signed on, but it’s not such a great fit anymore. Whether you can adapt to your client’s needs as they change could determine whether they stick with you or churn to a more flexible agency.
Building lasting client relationships with Teamwork.com
Reducing churn is one key to ongoing agency profitability. There are plenty of ways to work toward this goal, and running through the center of many churn reduction strategies is a common theme:
Relationships.
Nurturing client relationships keeps you out of the commodity market, and it creates value for both the client and your agency.
Only Teamwork.com was built with client relationships in mind. It’s project management software built for agencies and client work, and the powerful Client User mode gives you the freedom and flexibility to invite clients directly into projects and collaborative spaces.
It’s the best project management tool for managing projects while nurturing client relationships. Ready to give it a try? Start your free Teamwork.com trial now!
More resources for agencies:
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